A RADical Way to Preserve Affordable Housing in San Francisco

by Kathleen Kelleher

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In order to preserve a major portion of its decaying public housing stock, the City of San Francisco is using HUD’s Rental Assistance Demonstration program to convert thousands of homes to non-profit ownership. LISC has helped guide the rehabilitation of these neglected units, with community developers and residents leading the way.

For 32 years, Arsina Rabichev has lived in a century-old Victorian apartment building on Eddy Street in San Francisco.

As tenants of one of the city’s 29 long-ailing public housing structures, she and her neighbors have endured failed elevators, stubborn pest infestations, broken locks and plumbing problems.

But today, Rabichev’s home stands newly transformed.

There are vinyl plank floors, granite countertops, modern cabinets and new weatherized windows airtight against chill air. Renovated bathrooms are leak-free and sparkly.

“The apartments are very beautiful,” said Rabichev, 90, a retired teacher who left Russia 37 years ago with her husband and two sons. “Before, if you had maintenance requests to the housing authority, you were put in a line and had to wait weeks and weeks. But it is very clean and sanitary now. It has made my life more joyful.”

Her building, one of two adjacent apartment buildings known as the Eddys (pictured above), were rehabilitated as part of San Francisco’s partnership with the U.S. Department of Housing & Urban Development (HUD) for a $1.4 billion plan to revitalize and rebuild the majority of the city’s deteriorating 4,584 public housing units for some 5,400 of San Francisco’s lowest-income families.

In the first phase of this transformation, through HUD’s Rental Assistance Demonstration Program (RAD), the city advanced over $500 million in repairs for its public housing, and slated 3,500 units for revitalization in a portfolio conversion to ownership and property management by community-based, affordable housing developers. It is the biggest RAD award in the nation and the largest affordable housing financial transaction in history, according to Ed Cabrera, HUD regional public affairs officer for San Francisco. The city’s transformation of its public housing stands as a model for the rest of the nation, he added.

A rendering of the new Ping Yuen Community Center to be built for a complex comprising 234 units, which to date has had no public gathering space for residents. A capital campaign is underway to fund the center's construction.

RAD was created in 2012 to protect the nation’s 1.2 million public housing units for the most vulnerable low-income tenants by accessing a stable mix of private and public funds, including low-income housing tax credits and tax-exempt bonds. A 2014 HUD report estimated that repairs for the country’s badly deteriorating public housing would total $26 billion.

“San Francisco basically took their entire public housing stock and made the political decision to transfer ownership to not-for-profit developers to preserve their affordable housing,” said Denise Scott, executive vice president of Local Initiatives Support Corp., (LISC) a national nonprofit organization that funded pre-development costs for the city’s massive conversion and supported nonprofit community housing developer owners with grants, training and educational platforms. “And they did this in one of the hottest real estate markets in the country.”

“We are talking about multiple not-for-profit affordable housing developers becoming owners of more than 30 public housing buildings in San Francisco,” she added.

Under RAD, tenants have a guaranteed right to remain in their housing through 20-year term agreements with mandatory renewal, but fears had to be assuaged about displacement during renovation and relocation. Losing affordable housing in San Francisco, where rents ranks among the highest in the country, often means low-income tenants have to leave their neighborhood to find a new home.

“All in one day, we became the owner, manager and developer and we started construction,” said Katie Lamont, housing director for the Tenderloin Neighborhood Development Corporation (TNDC), one of the nonprofit affordable housing developers of three developments comprised of 726 public housing units in the first phase, including the Eddys. “Our own staff acted as allies and advocates for the tenants, and planned and supervised tenant relocation during the renovation.”

Some tenants relocated offsite for the 12 months of construction to avoid the noise and disruption. Others moved in with family members and were offered vouchers for dinner or movies.

TNDC held bi-monthly tenant meetings and established a tenant services department and quality assurance oversight to make sure complaints were dealt with swiftly. Contractors were held accountable to meeting with residents.

By the end of 2015, San Francisco had invested $15 million in predevelopment money—the riskiest piece of the development process—financing the projects’ architectural, engineering, permits, architectural and lawyer fees. All critical elements to have in place before construction starts. But a $10 million gap remained to cover these essential costs. With the help of the Mayor’s Office of Housing and Community Development, Bay Area LISC was fortunate to form a partnership with Dignity Health, a large nonprofit health system. LISC and Dignity each put up $5 million to close the gap for these critically needed predevelopment costs at very low interest rates.

“Our community investment program is designed to provide low-interest loans to local nonprofits to address the social determinants of health in low-income communities such as housing, health clinics and access to food in food deserts,” said Pablo Bravo, vice president for community health at Dignity Health. “By leveraging our resources, we further advance our commitment to improving the quality of life and health of these residents.”

San Francisco’s re-envisioning plan required that community developers not only rehab with tenant input, but also provide onsite, wraparound supportive services. The community developers had a natural sense of what services were needed because they are rooted in the neighborhoods of the public housing units they own and serve. These services include translation, health care, youth and workforce development, exercise classes and educational opportunities. Some of the buildings added community rooms to foster neighborly interaction.

“Having the nonprofits as part of the development teams was critical in making sure housing was converted responsibly,” said Peggy Jen, a former LISC senior program officer who was in on the ground of the RAD process and now works with CCDC.

CCDC, a nonprofit community developer in the heart of Chinatown, leads the largest RAD conversion in that neighborhood, and has taken ownership of nearly 580 units across four public projects spread out over seven buildings. As a place-based organization, being a part of the RAD process was a natural fit for CCDC, with its deep roots in the neighborhood. CCDC has relocated 60 families at a time to rehab housing units, an enormous undertaking.

“When you take over an occupied building that was being run by a housing authority, which wasn’t working, it is a culture shift,” said Cindy Wu, deputy director for CCDC. “But I think the impact has been truly felt already for the residents who have moved back into their units.”

Wu noted that people were relocated for periods as long as 11 months because the backlog of maintenance was so vast: decades of disinvestment, faulty electrical and plumbing systems, mold and other complaints that had gone nowhere.

The San Francisco Housing Authority retains ownership of the land the buildings are on, which is leased for 99 years to the nonprofit housing developer owners who run and maintain the public housing buildings.

The robust effort has had big payoffs for residents. With additional long term capital provided by other investors, the 1,425 units of phase one of construction were completed by the end of 2017 (the 2,066 units of phase two are expected to be completed in 2019).

For tenants like Luis Castillo, the revitalization is dramatic and welcome. Castillo is a translator for Spanish-speaking residents and a tenant association vice president for 350 Ellis, a 96-unit building now owned by TNDC. Renovations to 16 apartments are complete. Castillo, who uses a wheelchair, was about to be temporarily relocated to another newly renovated apartment in the building while his studio is rehabbed.

“It is such a change,” Castillo, 68, said. “I saw the new apartments and they had new tables and new beds. Oh, beautiful…really nice.”

Kathleen Kelleher is a Santa Monica-based journalist who has written for the Los Angeles Times, the Orange County Register and Blueprint, among other publications.